P. Chidambaram in New Delhi on Friday. (AFP)

New Delhi, May 30: A day after relaxing restrictions on Indian firms keen to raise overseas funds, the government today said it might further relax rules governing external commercial borrowings (ECBs).

“The government and the RBI (Reserve Bank of India) are working together and will find a way to ease ECB restrictions,” Union finance minister P. Chidambaram said, while addressing the annual meeting of Assocham.

He said the government had imposed restrictions on firms to raise funds through ECBs in August 2007, which had been mostly lifted.

“And I said then and I say now because the time has come. We have lifted some restrictions yesterday. Some of the restrictions remain,” he said and added that these could be lifted soon.

Although the government has allowed the infrastructure sector to raise up to $100 million (about Rs 400 crore) from overseas markets and other firms to raise up to $50 million, there are still restrictions on spending in the domestic market.

Firms would continue to be allowed to raise up to $500 million under the automatic route, and the other norms regarding prepayment and refinancing of borrowings would remain unchanged.

Earlier, Chidambaram said the decision to relax the ECB norms would have a “positive effect on the financing requirement of the infrastructure and the SME (small and medium enterprise) sectors”.

Chidambaram once again asked industry to hold price lines. “When input price rises there is a compulsion to increase the prices of products, but even then there is considerable room for industry to hold the price line,” he said.

The finance minister said he expected economic growth to be about 8.5 per cent this fiscal despite high inflation. “Year 2008-09 has began on a rather gloomy note, yet I dare say with some degree of confidence that we (India) should atleast clock 8.5 per cent GDP growth,” said Chidambaram.